Abstract
In the Public-Private Partnership highway projects the Minimum Revenue Guarantee and Toll Revenue Cap policies are effective measures for risk and benefit sharing between the government and the private sector. However, if the Minimum Revenue Guarantee and Toll Revenue Cap values are unreasonable, it may lead one part of the investors to take too much risk and financial burden. This paper mainly establishes six objectives from the return and risk perspectives of the government, the concessionaire and the overall situation respectively. Because the traditional Discount Cash Flow method does not consider the risk factors, this paper proposes to use Monte Carlo simulation and scatter search algorithm to calculate the optimal values of the Minimum Revenue Guarantee and Toll Revenue Cap under different objectives. Compared with the statistics of the Net Present Value under different cases, it was summarized that when the objective is minimizing the variance of the total Net Present Value, the investors will realize the Pareto optimal state between the return and risk. In addition, it was found that the government is more sensitive to the Minimum Revenue Guarantee and Toll Revenue Cap marginal values according to the sensitive analysis. Therefore, the model has an effect on improving the fairness of the risk sharing measures, reducing the financial burden of the investors especially the government, and increasing the investment attraction of the private sectors.
Highlights
At present, the highway investment modes are divided into three types, the first type is the completely government’s investment
Because the traditional Discount Cash Flow method does not consider the risk factors, this paper proposes to use Monte Carlo simulation and scatter search algorithm to calculate the optimal values of the Minimum Revenue Guarantee and Toll Revenue Cap under different objectives
Uses the OptQuest tool of the Crystal ball software to analyse the optimal values of the Minimum Revenue Guarantee (MRG) and Toll Revenue Cap (TRC) under different objectives, which is a general-purpose optimizer that based on the scatter search methodology
Summary
The highway investment modes are divided into three types, the first type is the completely government’s investment In this mode, the main capital sources are the government financial investment and government debt financing. The private sectors raise funds independently and take the corresponding responsibility This mode can improve the efficiency of management, but the ability of financing is weak, the operation is complex and the resistance ability of risk is poor. This mode can utilize the private enterprise’s abundant capital, advanced technology and efficient management experience to ease the government’s financial pressure and improve the management efficiency. If the private sector takes too much risk, it will reduce the interest of the private enterprise to invest
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